IT and software: The often overlooked dealbreaker

How many organisations do not fully consider software implications when buying or selling a company? Mergers and acquisitions pose a massive challenge for any IT infrastructure, especially where merged organisations are of a similar size.

Melissa Conlon, commercial director, Magma Digital

A recent survey has shown that 75 per cent of failed mergers and acquisitions were due to a failure to meet requirements of IT and software, for merging business critical supporting systems such as back office systems and billing.

Securing information before a purchase or a merger is key, as a minimum, organisations should consider:

• What software licenses does the company have and how critical are they to the company’s core business?
• What software is critical to the company’s operations, and does the company have appropriate licenses for the IP (both open source or proprietary) of that software and does this cause any exposure?
• Does the company’s usage of that software comply with use limitations or other restrictions?
• Requesting architectural documentation for the system structure and applications
• Identify who wrote the original base software and undertake a full code review/systems audit

Prior to acquiring a company insist on conducting a technical debt assessment as part of wider code audit during the due diligence process. When this assessment is complete the buyer should deduct a monetized version of the technical debt assessment from the acquisition price.